Essay
Consider the situation of firm A and firm B.The current exchange rate is $2.00/£ Firm A is a U.S.MNC and wants to borrow £30 million for 2 years.Firm B is a British MNC and wants to borrow $60 million for 2 years.Their borrowing opportunities are as shown,both firms have AAA credit ratings.
The IRP 1-year and 2-year forward exchange rates are ($ ∣ £)= = ($ ∣ £)= = USD pounds
Explain how this opportunity affects which swap firm A will be willing to participate in.
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